Stock Options

On April 22, 2014, the Board of Directors of the Company (the “Board”) adopted the Glowpoint, Inc. 2014 Equity Incentive Plan (the “2014 Plan”), subject to requisite stockholder approval. On May 28, 2014, the 2014 Plan was approved by the Company’s stockholders at the Company’s 2014 Annual Meeting of Stockholders. Also on May 28, 2014, the Board terminated the Company’s 2007 Stock Incentive Plan (the “2007 Plan”). Notwithstanding the termination of the 2007 Plan, outstanding awards under the 2007 Plan will remain in effect accordance with their terms.

The purpose of the 2014 Plan is to promote the success of the Company and to increase stockholder value by providing an additional means to attract, motivate, retain and reward selected employees and other eligible persons through the grant of equity awards. Awards may be granted under the 2014 Plan to officers, employees, directors and consultants of the Company or its subsidiaries. The 2014 Plan permits the grant of stock options, stock appreciation rights, restricted shares, restricted stock units, cash awards and other awards, including stock bonuses, performance stock, performance units, dividend equivalents, or similar rights to purchase or acquire shares, whether at a fixed or variable price or ratio related to the Company’s common stock, upon the passage of time, the occurrence of one or more events, or the satisfaction of performance criteria or other conditions, or any combination thereof, or any similar securities with a value derived from the value of or related to the Company’s common stock and/or returns thereon. A total of 4,400,000 shares of the Company’s common stock are available for issuance pursuant to awards under the 2014 Plan. No awards were granted under the 2014 Plan during the three and nine months ended September 30, 2014.

A summary of stock options granted, exercised, expired and forfeited under our stock incentive plans and stock options outstanding as of, and changes made during, the nine months ended September 30, 2014, is presented below (shares in thousands):



	Outstanding				Exercisable
	Number of Shares Underlying Options		Weighted Average Exercise Price		Number of Shares Underlying Options	Weighted Average Exercise Price
Options outstanding, December 31, 2013	1,792		$	2.21	410	$	2.71
Granted	—		—
Exercised	(50	)	0.90
Expired	(50	)	5.29
Forfeited and canceled	(333	)	2.71
Options outstanding, September 30, 2014	1,359		$	2.02	675	$	2.06

For the nine months ended September 30, 2014, 50,000 options were exercised and converted into 20,000 shares of common stock. For the nine months ended September 30, 2014, there were no options granted and 50,000 options expired. The weighted average fair value of each option granted is estimated on the date of grant using the Black-Scholes option valuation model with the weighted average assumptions during the nine months ended September 30, 2013 as shown in the table below. No assumptions are presented for the three and nine months ended September 30, 2014 as no options were granted during this period.



		Nine Months Ended
		September 30,
		2013
Risk free interest rate		0.8%
Expected option lives		5 years
Expected volatility		103.2%
Estimated forfeiture rate		10%
Expected dividend yields		—
Weighted average grant date fair value of options		$1.39

The risk free interest rate is based on U.S. Treasury yields for securities in effect at the time of grants with terms approximating the expected life of the grants. The expected option lives and forfeiture rates are estimated based on the Company’s exercise and employment termination experience. The Company calculates expected volatility for a stock-based grant based on historic daily stock price observations of its Common Stock during the period immediately preceding the grant that is equal in length to the expected term of the grant. The assumptions used in the Black-Scholes option valuation model are highly subjective and can materially affect the resulting valuations.

Stock option compensation expense is allocated as follows for the three and nine months ended September 30, 2014 and 2013 (in thousands):



	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2014		2013		2014		2013
General and administrative	103		146		254		503
	$	103	$	146	$	254	$	503

The remaining unrecognized stock-based compensation expense for options as of September 30, 2014 was $908,000, of which $20,000, representing 10,000 options, will only be expensed upon a “change in control” as defined in our stock incentive plan, and the remaining $888,000 will be amortized over a weighted average period of approximately 2.12 years.

There was no tax benefit recognized for stock-based compensation for the three and nine months ended September 30, 2014 or 2013. No compensation costs were capitalized as part of the cost of an asset during the periods presented.